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Loonie jumps back above parity

The Canadian dollar jumped about 1.5 cents U.S. Monday in a move that left currency analysts scratching their heads as to the cause.

Shortly after midday, the currency was close to the session highs, up 1.48 cents to 100.29 cents U.S.

"This smells to me as some sort of an equity-related either M&A type deal or sort of a one-off deal that has gone through the market."

The Canadian dollar has surged in the past as deals involving large amounts of Canadian dollars have boosted demand for the currency.

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The dollar's latest move above parity, for the first time since the middle of this month, came despite a report that Canadian economic growth will likely continue to disappoint.

The International Monetary Fund said Monday that Canada's economic growth will slip to 1.8 per cent this year.

The study blames the high loonie itself and a cooling in domestic demand for its pessimistic outlook.

The rise came after the loonie did particularly well against currencies other than the U.S. dollar in overnight trading.

"One of the things we saw in the overnight session that helped the dollar rally was good buying of the Canadian dollar against foreign currencies other than the U.S. dollar. In other words, we saw people buying the Canadian dollar against the yen, and Canada against the euro in particular," said George Davis, chief technical analyst at RBC Capital Markets.

The higher dollar also comes at a time when the Bank of Canada is widely expected to continue to cut interest rates to cushion the economy from the downturn in the U.S.

The central bank makes its next scheduled announcement on interest rates March 6 but markets already widely expect a cut of at least a quarter point.

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"I would say that based on where we are right now, the market is still sort of leaning towards a 50-basis-point cut by the bank, so that still remains a distinct possibility," added Davis.

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